Moritz’ Portfolio Summary - May 2023

Lately, I’ve been expressing my optimism about the future so frequently that even I was growing tired of it.

Now, my year-to-date returns have gone up by 32% versus last month’s -4%. In less than 30 days.

Can you believe how quickly things can change?

For almost two years of continuous market pessimism, every passing month delivered a new blow. And just when it seems we are finally overcoming the challenges, new ones arise — such as the recent storms of NET, SNOW, and S.

I want to be open with you: I too am fighting with my own struggles. At times, concerns about my portfolio, the future, and the state of the world weigh heavily on my mind.

However, I’ve learned the importance of taking a step back and looking at the big picture. I give my thoughts the necessary space to connect the dots before rushing into any decisions.

I’m still figuring out my investing style and what principles resonate with me the most: I’m neither a trader nor a momentum investor. Instead, I prefer to invest long-term in businesses that have strong, sustainable growth potential, like Snowflake or Cloudflare.

I acknowledge the challenges these businesses currently face—a deceleration in revenue growth and metrics like DBNRR.

But I refuse to lose sight of the bigger picture and the underlying thesis driving these businesses. When I recognize a significant opportunity lying ahead, I’m reluctant to make impulsive moves.

By reading and reflecting on management insights and considering the vast opportunities surrounding data and AI, I maintain my confidence in holding onto them, as I believe they will eventually regain momentum.

I may not act as ruthless as some other investors, and I’m uncertain whether that’s advantageous or not. I deeply respect those who make quick decisions to cut ties or sell their investments, but that’s just not my style.

Am I always right? Certainly not.

But here’s the truth about investing: nobody has all the answers. If they did, there would be a guaranteed formula for instant wealth.

The world of investing offers countless strategies and paths toward achieving our goals. It’s like assembling a puzzle, with various elements such as approach, valuation, investment theses, summaries, opinions, metrics, and more.

The longer we invest, the more we figure out what works best for us. During this process, mistakes are bound to happen—but that’s okay because they serve as valuable learnings. And when we embrace our mistakes, we accelerate our learning progress toward our goals. It’s a win-win.

Time will always be the ultimate judge, teaching me the most valuable lessons along the way. And when I’ve learned them, you can be sure I’ll share my insights with you.

My Portfolio

The purpose of this monthly portfolio review is to help you understand my investment philosophy, view my current investments, and facilitate mutual learning.

1. Portfolio performance compared to market

Timestamp: 5/31/2023
Timestamp: 5/31/2023

Timestamp: 5/31/2023
Timestamp: 5/31/2023

2. Portfolio allocations

Timestamp: 5/31/2023

3. Recent changes to the portfolio

Trimmed: Snowflake

A few weeks before earnings, I reduced my position as it had grown to over 20% and I was getting uncomfortable with its size. This was due to its run-up to over $180. I also needed cash to increase my high-conviction positions.

After earnings, I reduced my position further, from 17% to 14%, due to uncertainties around the FY guide. More details below.

Trimmed: Cloudflare

After the earnings report, I took some time to reflect on NET and decided to trim the position slightly from 16% to 15%. Lucked out here, since I did this after the stock price closed its gap. Like Snowflake, I wanted to match my reduced conviction in Cloudflare with its reduced FY guide.

Trimmed: DataDog

Similar to SNOW and NET, I aimed to align my conviction with the development of fundamentals. Although they were better than expected, they were still not great. That “Great” label is necessary to earn an allocation of 15%+. Additionally, I wanted to increase other positions with higher conviction.

Added: Zscaler

I added funds in small increments both before and after the positive preliminary guide on May 8th, with a target allocation of 10%. Last month, I based my reasoning on the ongoing decline in the stock price.

At that time, the valuation had reached a forward EV/S of 8.2, which I considered to be undervalued when looking at the strong fundamentals. Since then, Zscaler has revised its Q2 revenue guide by +5% and its FY guide by +2%, which propelled the stock up by 55% in May.

Added: The Trade Desk

The Trade Desk reported excellent Q1 earnings results. As a result, I have increased my position with a target of 10%. More below.

Added: monday

Similar to The Trade Desk, Monday demonstrated strong performance. As a result, I have already increased my allocation and plan to eventually bring it to over 10%. More details are below.

Added: Crowdstrike

Although ARR came in slightly lower than expected (-8.5% YoY), management has reaffirmed its full-year ARR guidance. All other metrics were strong. I took advantage of the drop in after-hours trading (-10%) to increase my allocation from 9% to 10%.

New position: Confluent

Confluent is a new and small position that I find intriguing due to its mission-critical aspect of integrating itself into the core of a business. More below.

4. Company updates

Note: Absolute numbers relate to last quarter’s earnings release. Metrics are adjusted values (non-GAAP).


What they do: Provides data storage, management, and sharing for the cloud
Type of revenue: Consumption-based
Cash: $5B
TTM revenue: $2,134M (product)
Market cap: $54B vs last month’s $45B

On May 24th, Snowflake reported its Q1 earnings, in which my allocation was 18%. At first, I was amped up, but that quickly changed to amped down.

Why: Management lowered its FY guide and the high valuation led to a deserved 12% after-hours drop, following a 31% run in May. Lower consumption due to older customers. Additionally, there has been a change in consumption patterns.

Let’s dive into the numbers:

In terms of product revenue, the company generated $590.1M, a 49.6% increase YoY and a 6.3% increase QoQ. This met my expectation of exactly $590.1M.

However, remaining performance obligations (RPO) were $3,400M, down 7.1% sequentially, which missed my expected value of $3.750M. This decline in RPO is concerning, even though Q1 is typically the weakest quarter for RPO. As I mentioned in my previous earnings recap, customers now only commit to future spending for the coming quarters, rather than years in advance.

Q2 product revenue guide was issued at $625M, which is below my expected $630M. However, this still suggests 9.1% quarter-over-quarter growth and 38.1% year-over-year growth if they meet or beat guidance like in the past.

In my previous review, I assumed a slight acceleration in growth, and this assumption is now materializing. Although I’m happy with the Q2 guide, the FY guide in Snowflake’s Q1 earnings report is the lowlight:

Full-year 2024 product revenue guide was revised down to $2,600M (34% year-over-year growth) from $2,705M (40% year-over-year growth) previously. This reduction raises concerns, especially after the strong Q1 report and the decent Q2 guide.

Snowflake’s CFO previously had a preliminary FY24 guide of 47% YoY growth ($2,815M) in their Q3 earnings call, which they had to revise down to 40% YoY growth ($2,705M). Now, they had to do it a second time, down to $2,600M (34% YoY growth). It’s disappointing to see such a steep decline in growth projections in just two quarters.

Let’s take a closer look:

While it’s important to understand that Q1 is always a challenging bookings quarter and the current macro environment magnifies that, management saw headwinds globally, starting in April. Consumption slowed after the Easter holidays through to the earnings day, and the majority of this underperformance is driven by older customers.

They weren’t able to identify a single cause of the consumption slowdown, but mentioned a few reasons:

  • Organizations have re-evaluated their data retention policies, opting for 3 years instead of 5, to delete or archive stale and less valuable data. This lowers their storage bill and reduces compute cost, which means less storage revenue for Snowflake.

However, Hyperscalers like Microsoft Azure, Amazon AWS, and Google Cloud Platform also mentioned seeing retention policies change within their customers. It suggests that the issue is not isolated to Snowflake.

  • Additionally, management noted that the development is not due to competitive pressures, but because customers remain hesitant to sign large multi-year deals. This is another good indicator that we are not dealing with execution issues.
  • Productivity is not meeting management’s expectations. When an analyst probed about this issue, Frank Slootman responded that while there are typical day-to-day challenges that every business faces, productivity is primarily impacted by macro factors.

I also noticed three recent statements about consumption trends that made Snowflake seem unusual compared to other companies:


In Q1, consumption varied from month to month. We benefited from strong consumption in February and March. Starting in April, consumption slowed after the Easter holidays through today. The strength in the quarter was driven by our healthcare and manufacturing customers. Financial services customers outperformed our expectations.


From a consumption basis, we did see a little bit of an impact relative to some of the consumption trends in our cloud business in the second half of March and we saw that manifest itself in the financial vertical. What we did see though in April is a nice bounce back and so we saw return to normal patterns for the consumption business and the financial vertical. […] I think in some customers, both in tech and in financial services , there was a fair amount going on in the organizations.


I would say April is broadly consistent with what we’ve seen in Q4 and Q1. I think there’s no major difference to call out there. And it’s too early also for us to call the quarter obviously. So there’s nothing we’re really shocked to point out about April.

I keep wondering how other consumption-based businesses didn’t experience headwinds in April. My three hypotheses:

H1: Different businesses in different industries with different customer segments experience adverse consumption trends.

H2: Snowflake’s consumption patterns are tied to AWS cost optimization activity. In Amazon’s last quarter’s earnings, AWS experienced weakness, slowing to 11% year-over-year growth. Slootman confirmed that hypothesis by saying, “There’s definitely a ripple effect because we’re in the stack. So, the answer, generally speaking, is yes.

H3: Snowflake has execution issues. If the trend towards a sharp customer growth slowdown persists over the next quarter, that hypothesis might materialize.

Takeaway on FY guidance:

Based on the information above, I do not believe that there are any execution issues. The change in April consumption trends is likely due to Hypotheses H1 and H2, as the macro environment continues to impact the fragile nature of a consumption-based revenue model. The FY guidance and customer growth are key metrics to keep an eye on.

Cash Flow & Profitability

  • The product gross margin improved from 75% to 77% in Q4.

  • Operating income was $32.61 million, representing 5.2% of revenue, an increase from $1.68 million in the previous year. Sales and marketing expenses were slightly reduced, contributing to the positive operating margin.

  • Net income was $54.15 million, 26.9% of revenue, up from $1.52 million a year ago.

  • Earnings per share increased to $0.15 from $0 a year ago.

  • Operating cash flow was $299.44 million, 48% of revenue, up from $184.61 million a year ago.

  • Free cash flow was $286.92 million, 46% of revenue, up from $181.4 million a year ago.

  • R&D expenses were $128.96M, 20.7% of revenue. As a percentage of revenue, it increased compared to previous quarters, indicating that management is investing aggressively in R&D.

  • S&M expenses were $244.63M, 39.2% of revenue. As a percentage of revenue, it remained stable compared to previous quarters.

  • Cash is $5B, while debt is $0.

Takeaway on Cash Flow & Profitability:

Positive developments across the board, with an outstanding 46% free cash flow margin, indicate that execution issues are not a problem.

Dilution is still under control, as Snowflake used $192 million of cash to repurchase approximately 1.4 million shares to date at an average price of $136. This also reduced the shares outstanding FY Guide to 362M, down from 363M previously, which is a positive for us.

Management noted that favorable pricing with cloud service providers, product improvements, scale in public cloud data centers, and continued growth in large customer accounts will contribute to year-over-year gross margin improvements.

Customer Growth:

  • Added 317 total customers, reaching 8,167, up 28.9% YoY and 4.0% sequentially. Their lowest since Q1 2020. Management has stated that they don’t give this number much attention since it’s the large customers that are more important. However, the total customer count can still influence the $1M+ cohorts, and weak total customer growth could lead to an undesired trend in the $1M+ customer cohort.

  • Added 10 Forbes 2000 customers, reaching 590, up 15% YoY and 1.7% sequentially. It’s worth noting that every quarter the historical numbers for this cohort keep changing, and is very volatile.

  • Added 43 $1M+ customers, reaching 373, up 81.1% YoY and 13% sequentially. This is a positive surprise since 365 total $1M+ customers were expected. Moreover, the key large customer cohort keeps growing steadily and reached a record high in net new customers.

Data Sharing:

  • Customers using Stable Edge (data sharing) increased to 2,042, up 61.1% YoY and 13.1% sequentially. Stable edges are defined as continuous data-sharing connections between two or more Snowflake accounts. More customers using stable edges boost Snowflake’s network effect and moat. This development looks healthy.

  • Marketplace listings increased to 1,894, up 39.5% YoY and 3% sequentially. However, there has been a sharp deceleration in listings (22% → 13% → 11% → 8% → 3%). Only 56 net new listings have been added, which is an all-time low. This is a metric to watch closely, but “using stable edge” is a better indicator for the health of Snowflake’s data sharing (moat).

  • Powered by Snowflake registrants increased to 971, up 128.5% YoY and 18.1% sequentially. This indicates a strong interest in working more closely with Snowflake.

Dollar-Based Net Retention Rate (DBNRR):

  • DBNRR declined to 151% vs the expected 147%, down from previously 158%. While still excellent, optimizations from customers are emerging and likely to further reduce this metric in coming quarters (as it reflects the last 24 months). DBNRR is expected to continue decreasing in the upcoming quarters due to the lagging metric.

  • However, the decline in DBNRR alone isn’t concerning since it’s directly connected to optimizations by customers due to the macro environment and management expects it to stay well above 130% long-term.

Takeaway on customers:

I was positively surprised by the growth of customers spending $1M or more (one of the most important metrics for Snowflake), but the total customer cohorts continue to slow down sequentially.

While Snowflake’s North Star is the $1M+ customer segment, the smaller cohorts still need to emerge from the total customer cohorts (usually taking 6 to 9 months to ramp customers up).

If these smaller cohorts slow down, fewer $1M+ customers will be added in the future. Additionally, only 10 G2000 customers were added, which is the lowest number since 2021, although this metric tends to be volatile.

I am concerned about customer growth, and these numbers are important metrics to monitor. However, the growth for customers using stable edge keeps steadily increasing.

Additionally, the fact that the number of queries outpaced revenue (57% YoY) is encouraging, as it indicates that customers are heavily using Snowflake and remain satisfied.

This can be attributed to optimizations such as storage reduction and the impact of Graviton 2, a customer-centric initiative that Snowflake implemented over the past year.

AI - Potential Tailwinds Ahead

Management has highlighted that Generative AI’s chat-style of interaction will bring disruption, productivity, and obsolescence to tasks and industries. Enterprises can benefit from customizing this technology with their own data.

Snowflake’s platform is well-suited for rapidly adopting new language models, and AI’s focus on textual data will lead to the rapid proliferation of model types and specializations.

Snowflake’s mission is to demolish limits to data, users, workloads, applications, and new forms of intelligence. Interest in machine learning, data science, and AI on Snowflake is escalating. Over 1,500 customers, up 91% year-over-year, are leveraging Snowflake for these workloads in Q1 of 2023.

Additionally, Snowflake’s acquisition of Neeva will enable rich, search-enabled, and conversational experiences for non-technical users to extract value from their data.

What Now?

I’m giving management the benefit of the doubt. During uncertain times like these, I need to trust them. If I’m investing in the first place but then jumping off because of a few bumps and not trusting management, then I should question my investment in the first place.

This situation is different from Zoom’s, for example. Remember, Zoom skyrocketed during covid, but the market was saturated soon and growth banked. It was unlikely to maintain strong growth for years to come. Zoom had just captured its market.

In contrast, Snowflake has a lumpy, cyclical, and volatile consumption-based model compared to a pure subscription-based one. While it has more downside in bad environments, it also has more upside once it turns. Now, this model is getting hit one after another due to CFOs protecting their money.

Snowflake has an incredibly large runway ahead with data — which is AI, which is everything.

According to Frank Slootman, enterprises are being cautious with their budgets due to an unsettled demand environment. However, they remain confident in the long-term opportunity.

Management expects this trend to reverse but is factoring in these patterns for the full year due to a lack of predictability and visibility of customer behavior. This seems to be the most conservative approach they could take at this time, and I don’t expect them to revise their FY guidance again in the future.

Frank Slootman stated:

"I don’t think it’s permanent. […] In 2020 and 2021, it was growth at all costs and the mentality was let it rip. Now we’re in the complete inverse of that situation. We know where we have strong certainty, predictability on cost, and so on. I don’t think that will last. We’re just on the other side of the spectrum right now. And we will revert to the mean at some point. "

Scarpelli also noted that although they have a large customer base, they have only migrated a fraction of the data with multi-year plans to Snowflake. Moreover, they have big customers in the pipeline that are likely to close next year, and many new products coming out in the next couple of years.

Speaking of products, Snowpark’s daily credit consumption is rapidly increasing. In fact, 30% of all customers are now using Snowpark, which is a significant increase from the 20% seen in the previous quarter.

Additionally, Snowpark consumption has risen by 70% quarter-over-quarter. Snowpark is a new developer experience for Snowflake, which enables developers to write code in their preferred language and run it directly on Snowflake.

Management continues to iterate that they are executing on their strategy and are confident that this will ultimately lead to the “data cloud network effects” they have laid out over the past few years and on track to achieve $10 billion of product revenue in fiscal 2029 with a better margin profile than what was laid out last year.

"We are confident this will ultimately lead to the data cloud network effects we have laid out over the past few years." - Frank Slootman

This comment, from the Q1 earnings call, is underappreciated: It suggests that Snowflake is still in its early stages. That’s why its valuation remains high, even after revising guidance down twice in a row!

Any other company on this planet would have been dumped to hell, but not Snowflake. Once the network effects due to data gravity become visible, there will be an unprecedented demand with a huge growth runway ahead.


Snowflake’s customer acquisition and go-to-market (GTM) strategy focuses on large customers and the Global 2000, which includes the largest and most valuable enterprise companies in the world. This creates a strong data gravity and network effect that attracts more customers and partners to Snowflake’s data cloud.

For example, Snowflake has announced that Blue Yonder, one of the biggest software companies in supply chain management, will fully re-platform onto Snowflake. Blue Yonder is a key participant in both the manufacturing and retail data clouds. They are the first major supply chain provider to commit to creating an end-to-end supply chain platform on Snowflake. Supply chain management is a highly networked discipline, as changes typically involve numerous different entities.

Why that is so critical:

Up until today, supply chain management is operated by email spreadsheets which is incredibly inefficient because each supply chain is different. Supply chain management will be the most network segment of all industries that Snowflake is operating in and overtake financial services.

Frank Slootman noted:

“Because there’s absolutely no penetration right there. These are unsolved problems very much in almost in the history of computing . That’s how serious that is . So, fantastic historical opportunity for the technology to address.”

Snowflake is on its way to solving this, which means all the entities in the supply chain will become Snowflake customers. Blue Yonder will be the start of that new era which should lead to significant network effects from this strategic alliance. And Snowflake’s data gravity offers opportunities to explore and capitalize on many industries beyond supply chain management.

In a nutshell

The Bad:

  • Revised FY guide for 2nd time

  • Negative sequential RPO growth (-7.1%)

  • DBNRR down to 151% (still excellent)

  • Total customer additions continue to slow down (317 new customers added, up 4.0%)

  • Forbes 2000 customer additions also slowed to 10 (volatile)

  • Marketplace listings up 39.5% but only 3% sequentially (1,894 total)

  • New “Optimization headwind”: customers deleting/moving less valuable data to cheaper storage

The Good:

  • Strong product revenue of $590M in Q1, representing a 50% increase YoY.

  • $1M+ customer cohort (north star) grew to 373, representing an 81% increase YoY.

  • Q2 guidance indicates a quarter-over-quarter acceleration.

  • Strong free cash flow of $287M, with a 46% margin.

  • Gross margin is improving to 77%.

  • Snowflake is improving profitability while slowing growth signals no execution issues

  • No change in competitive pressures.

  • Management reaffirmed its goal of achieving $10B in revenue by 2029.

  • There are huge network effects ahead due to data gravity and AI tailwinds.

  • Strong growth in Snowpark usage, with 30% of all customers using Snowpark and consumption up nearly 70% quarter-over-quarter.

  • Reduction in dilution - FY guide is 362M, down from 363M previously due to the stock repurchase program.

  • Healthy development in customers using Stable Edge (data sharing), with a 61.1% YoY increase and 13.1% sequential increase.

  • Potential revenue accelerators are expected due to upcoming product announcements, including Streamlit.

  • The number of queries is outpacing revenue, with a 57% YoY increase in the quarter.

  • Management maintains a confident tone, with conviction in the long-term opportunity remaining unchanged and expects to revert back to the mean.

  • Many customers have multi-year plans and have only moved a fraction of their data.

  • There are deals for next year with big customers that have long sales cycles.

  • Cash: $5B. Debt: $0.

My Investment Decision:

I decreased my position from 17% to 14% due to reduced guidance (twice) and slower customer growth to match my confidence level. I don’t plan to reduce it any further and feel comfortable with this allocation.

I believe the thesis remains intact. To uphold the thesis of the network effect, I need to see both stabilization and reacceleration in customer growth.

I am also excited about Snowflake’s Investor Day on June 27 in Las Vegas, which will be held in conjunction with the Snowflake Summit. The event will feature significant product announcements, including Streamlit, which is expected to have a meaningful impact on revenue going forward.

Key metrics to watch:

Full-year Guide, total customer growth, customer growth for those spending $1M or more per year, and Forbes Global 2000 customers, stable edge usage, and RPO.

PS - Wishing Mike Scarpelli a speedy recovery from his coughing!


What they do: Provides cloud-based security for infrastructure exposed to the internet
Type of revenue: Subscription-based
Cash: $1.7B
TTM revenue: $1,053M
Market cap: $23B vs $18B last month

My stance on Cloudflare hasn’t changed much since last month’s review, and I still lean toward my bullish case:

During the earnings call, management noted that they continued to witness a challenging business environment, which deteriorated significantly in March when negative headlines emerged related to SVB, the broadening banking crisis, which was in the first two weeks of March. They then stated: “[…] almost half of the new business closed in the last 2 weeks of the quarter, which is very nonlinear for us.”

I understand this as things improving at the end of March. Remember: other companies have reported similar issues early in this earnings season.

I have been following Cloudflare’s CEO, Matthew Prince, for a long time now. He is a trustworthy and respectable CEO who cares deeply about his company. If I were in Matthew Prince’s position, I would issue a very conservative, sandbagged guidance to avoid missing it ever again . Doing so would make it possible for the company to beat and raise expectations.

In addition, management emphasized the 100 quota sales reps who underperformed and only generated 4% of annualized new business last year, compared to the top 15% of reps who hit 129% of their quotas. I understand that Matthew Prince wanted to emphasize the discovery of areas for improvement , which provides an upside and is not responsible for the slowdown , which indicates that there are no bigger execution issues.

My confidence is supported by their track record, macroeconomic influence, the pace of innovation, products, and the announcements made during their last investor day on May 4th.

Other smart investors like @Raylight have already outlined and explained additional information about why Cloudflare might still be on track.

Despite lowering their guidance, I cannot find much wrong with Cloudflare. The next quarter will provide answers, and I may change my stance based on that.

Cloudflare ACV


What they do: Provides cloud-based infrastructure monitoring
Type of revenue: Consumption-based
Cash: $2.0B
TTM revenue: $1,794M
Market cap: $30B vs last month’s $22B

Datadog rallied by 16% after reporting Q1 2023 earnings that were “better-than-feared”.

Revenue for the quarter was $481.7M, indicating YoY growth of 32.7% and QoQ growth of 2.6%. However, revenue was lower than expected due to a $5M service outage in March. Management learned from this incident and will take measures to prevent similar outages in the future.

Excluding this, revenue would have missed my expectations by only 1.4%. RPO increased by 7.5% sequentially, stronger than any previous Q1’s in history, indicating customer commitment.

DataDog achieved $2B in Annual Recurring Revenue for the first time, and management guided to $502M, which was only 0.7% below my expectations. As expected, the full year 2023 revenue guide has been raised by 0.5% to $2,100M. The projected operating income for the full year 2023 is $360M.

Strong profitability: gross margin consistent at 80.5%, operating income $86.4M, 17.9% margin, net income $98.1M, 20.4% margin, EPS increased to $0.28, op cash flow was $133.79M, 27.8% margin, and free cash flow was $116.34M with a 24.2% margin. Operating expenses were consistent with previous trends, indicating that DataDog is continuing to invest appropriately.

They added a record-breaking 2,200 customers, including 1,400 from the acquisition of Cloudcraft. However, when excluding those, only 900 organic customers were added, which is below the 1000 mark for the first time since 2020. Additionally, they only acquired 130 customers spending $100k or more. Management explained that this was due to a combination of weak seasonality in Q1 and macro factors during the call.

Large customers contribute to a solid 85% of total ARR. In addition, existing customer usage growth improved compared to Q4. It is worth noting that larger-spending customers continue to grow slower than smaller-spending customers, which explains the next point.

DBNRR was over 130%, but the trailing 12-month NRR is expected to be below 130% in Q2 due to customers being more prudent with their budgets.

DataDog signed an 8-figure ARR deal with a leading AI company (OpenAI), and a 7-figure expansion with a Fortune 500 healthcare business. An interesting case study about a healthcare expansion has been published: Before using DataDog, major incidents would mobilize up to 150 employees for around 3-4 hours. With DataDog, they only need 20 employees for around 30 minutes, with an opportunity to further reduce these numbers. At an hourly rate of $90, an incident without support from Datadog would cost up to $47,000. With Datadog, it only costs $900. That’s an incredible decrease in expenses.

Tailwinds are ahead: AI will expand observability opportunities (good for DDOG) and increase demand for computing and storage, while also driving digital transformation and cloud migration.

Management reiterated that the trend towards digital transformation and cloud adoption is continuing, with customers gradually optimizing usage and consumption patterns. One interesting commentary on hyperscalers: DataDog has decoupled from AWS deceleration and maintained higher growth than other hyperscalers in terms of sequential and ARR growth.

My Investment Decision

Overall, it was a decent quarter considering macroeconomic effects. My thesis remains intact: DataDog will accelerate growth and maintain durable growth beyond 2023 due to its new products, large market opportunity, steady addition of new customers, and existing customers spending more. I do not plan to make any changes to my allocation.

Key metrics to closely watch are total customer growth and growth of customers spending $100k or more, which I would like to see pick up again.

Sentinel One, Crowdstrike, Zscaler

The Cybersecurity Trio reported already last week.

Due to the vast amount of content in this summary, I plan to publish my reviews on Sentinel One together with Crowdstrike and Zscaler in my next portfolio summary.

Here are my quick takes in one word:


What they do: Simplifies, digitizes, and automates complex back-office financial operations
Type of revenue: Transaction- and Subscription-based
Cash: $2.7B
TTM revenue: $963M
Market cap: $11B vs last month’s $8.1B

In Q2 2023, BILL reported total revenue of $272.60M, up 63.3% YoY and 4.8% QoQ, beating my expectations of $263M and providing a positive surprise in the current environment.

While subscription-based revenue is accelerating due to a price increase ($66.7M, a 27.8% YoY increase and 8.5% sequential increase), Total Payment Volume (TPV) and therefore transaction revenue ($172.8M, a 52.5% YoY increase and only 1.9% sequential increase) is suffering from seasonality and macro.

That said TPV was stronger than expected (11% YoY, compared to Bill’s initial estimate of being flat), because Q3 quarter looked a lot closer to normal seasonal trends.

Additionally, the subscription price increase is now in their run rate numbers and as a result, we can expect a smaller sequential subscription revenue increase compared to recent history.

Unfortunately, transaction revenue makes up 65% of total revenue, while subscription is only 25%. This drags on revenue growth but should provide tailwinds once macro subsides. Management confirmed that the macro environment remains challenging, with small and medium-sized businesses cutting back on spending and looking to improve efficiency.

Float revenue was $33.1M, a 14.5% QoQ increase. Sequential growth is slowing down as expected, since this type of revenue cannot continue to rise indefinitely. It is hypothesized that float revenue serves as a hedge as long as interest rates remain high, but once rates decrease, it is hoped that transaction revenue will resume its upward trajectory, balancing out any future slowing in float revenue. We will see.

Management guided next quarter’s revenue to $280M, beating my expectations and implying 11% QoQ growth.

The full-year 2023 revenue guide has been raised by 3.5% to $1,042M and net income has been raised to $173.4M.

For the BILL standalone platform, Q4 TPV is expected to remain roughly flat compared to Q3. This is because Q3’s TPV performance was slightly lower than usual, and management expects that trend to continue.

Reminder: The hypothesis for Bill’s future revenue growth driver is Divvy. That’s why it’s important to pay attention to key metrics like customer growth to the divvy segment:

Divvy’s revenue was $88.60M, a 65.3% YoY increase and only 2.3% QoQ increase. However, it’s important to note that a mix of seasonality and macro factors had a negative impact on revenue. Additionally, it’s worth noting that Divvy’s revenue consists solely of transactions and does not include subscription revenue, which does not help stabilize it.

Bill added 2,400 customers to Divvy, up 49.7% YoY, 9.7% QoQ, now representing 27,100 Divvy customers. In my last earnings review, I noted: “This is most likely influenced by macro, but the key metric I am going to watch since BILL is a Divvy-story, see more below.”

Now it’s great to see customer growth accelerating for Divvy, after declining in the past quarters (16.8% → 14.4% → 10.1% → 8.3% → 9.7%)! Pleased to see that.

Revenue per transaction from Divvy customers was $8.69**,** down -5.7% QoQ. I assume the mix of seasonality and macro was the driver for the decrease, but I expect it to pick up again next quarter. Divvy customers still deliver the highest revenue per transaction.

Total Payment Volume for Divvy was $3.4M, up 4.1% YoY and only 3% QoQ (from 10% the quarter before) influenced by the mix of seasonality and macro. Expecting it to pick up again next quarter.

Looking at customers outside of Divvy, Bill added 3,700 standalone customers, an increase of 2.8% QoQ. I would like to see this growth pick up again.

Bill also added 11,400 financial institution customers. Unfortunately, total transactions for the financial institution segment have not grown meaningfully. Therefore, those customers remain less meaningful for now.

non-GAAP profitability remained strong across the board with an 87% gross margin, $34.8 million operating income, $58.7 million net income, $34.03 million operating cash flow, $23.97 million free cash flow, and $2.7 billion in cash on hand. The elevated gross margin was due to increasing float revenue and a favorable “payment mix”.

Overall, Bill exceeded my expectations in all areas of quarterly revenue and next quarter’s guide. It is encouraging to see that Divvy’s customer growth is accelerating and that Bill is becoming more profitable very fast. However, the duration of macro-related headwinds that affect transaction revenue is uncertain.

In the short term, Bill may face challenges due to small and medium-sized businesses being in standby mode, which will affect customer growth. Nevertheless, management sounded confident during the call and mentioned that the situation has stabilized.

They also indicated that they might see light at the end of the tunnel. Various comments were made, such as “we continue to see very high engagement with the platform.” This is encouraging, but it is still an open question of when things will start to turn around.

I also noticed that the total share count decreased from 117,258 to 117,213 due to the $300 million buyback program. This program helps to counter dilution.

Bill is integrating Divvy into its platform, which is expected to be done by the end of 2023. Management sees this as a potentially large revenue driver due to cross-selling opportunities. Rene Lacerte has over three decades of experience building payment solutions for SMBs, so I have confidence in his ability to succeed.

My Investment Decision

Bill is known for beating expectations and I anticipate upside surprises as long as the macro environment remains stable. Once headwinds subside, transaction revenue should increase significantly, similar to other consumption-based businesses. If not, there may be worse outcomes for everyone.

I’m happy with Bill’s Q2 earnings results. However, the business is complex, with multiple revenue streams and business units. Moreover, macroeconomic uncertainty is particularly significant for payment businesses. Therefore, I do not intend to make any changes.

The Trade Desk

What they do: Provides a platform for Ad Buyers (Agencies, Brands, and other technology companies)
Type of revenue: Long-term master service level agreements (similar to recurring)
Cash: $1.3B
TTM revenue: $1,646M
Market cap: $34B vs last month’s $27B

The Trade Desk (TTD) delivered excellent Q1 earnings for their fiscal year 2023:

$177M Record-free cash flow
46% FCF margin (!)
$1.3B cash
$0 debt

What more could you ask for in this environment?

Ah yes, GAAP-profitability, of course:

They hit that mark with a positive $9M GAAP net income!

Circling back to the non-GAAP front, they significantly beat their adjusted EBITDA guide of $78M and delivered $109M (29% of revenues) .

The EBITDA margin of 29% is their lowest since Q2 2020, but this is primarily due to higher interest income and tax benefits . These are subtracted from EBITDA (earnings before interest , tax , depreciation, and amortization) and do not necessarily represent a negative trend. On the contrary.

Adjusted EBITDA

Ignoring that, the EBITDA would be around $137M with an EBITDA margin of 37% and is "on track”.

Net income was $114M (30% of revenues) , up from $104.66M a year ago. Earnings per share also increased from $0.21 to $0.23 . Operating cash flow was $179M (47% of revenues) . These margins are incredibly strong and are one of the reasons why I’m holding this stock.

Non-GAAP operating expenses for R&D (19% of revenues) and S&M (21.7% of revenues) rose by 300 and 450 bps respectively year-over-year. This is likely due to in-person events and travel that did not take place in Q1 of the prior year as they had not yet fully resumed back-to-office work or in-person events, but nothing to worry about.

Revenue and guidance - another highlight:

Revenue for the quarter was $383M, which exceeded my expected $366M. This represents a 21.5% increase year-over-year and a -22% decrease quarter-over-quarter. Note: The negative QoQ decline is not worrisome, as Q1 is seasonally the weakest quarter for the company and the advertising industry in general.

The company beat its revenue guidance by 5% , which is a positive surprise since it breaks the negative trend of the previous 4 quarters:
4.1%, 3.6%, 2.6%, 0.2% → now at 5% !

The Q2 revenue guide was $452M, which exceeded my expected $437M, and was another positive surprise. Excluding U.S. political election spend, which represented a low single-digit percentage of spend in Q2 2022, the estimated revenue growth rate in Q2 of this year would be about 21% on a year-over-year basis, instead of an estimated 18%. This is without a beat. Assuming they beat their guide by just 2% (I expect a 4% beat), revenue is likely to accelerate again .

International spending , with a particularly strong performance in EMEA, accounted for 12% and outpaced North American spending, which accounted for 88%. Additionally, CTV business in Europe grew well into the triple digits YoY in Q1.

In terms of verticals , the travel sector nearly tripled its spending in Q1 compared to a year ago as it continues to recover from the pandemic, while spending on shopping and business was below average.


On the customer front, there is the usual 95% customer retention for the 9th consecutive year .

I also appreciated the comment about customers being able to work in month-to-month increments rather than committing to a yearlong or 6-month plan, which helps customers in uncertain environments like this.

Tailwinds: Connected TV (CTV)

Looking at the comments regarding the main investment thesis, Connected-TV (CTV), provides further confidence:

  • Jeff Green said that CTV currently accounts for 45% of spending and is the fastest-growing channel . The shift from linear to connected TV is accelerating , and this trend is the biggest secular tailwind the company may ever see in its history.

  • Netflix highlighted on their earnings call a few weeks ago that the ad-funded subscriber is more valuable to them than the ad-free subscriber. This bold statement supports The Trade Desk.

  • And streaming wars intensify each year, which makes integration with The Trade Desk somewhat inevitable for all major streaming platforms as they scale, because they need as much demand as possible on their platforms.

Touching AI

Jeff Green (CEO, The Trade Desk) reiterated a recent statement of Coca-Cola’s CEO:

“AI is going to make a huge impact in marketing" — James Quince, CEO, Coca-Cola

Which I agree with, being a marketing guy for 20+ years. This will be a significant development for marketing, and the same can be said for The Trade Desk .

He also highlighted their advantage in AI, as they analyze over 10 million ad requests per second. These requests represent a unique dataset that can be used to train generative AI with confidence for years to come. On June 6th , The Trade Desk will hold its “Net Platform Launch” event, which is “the largest in our history”. During this event, additional insights about AI will be announced.


I was happy to see that The Trade Desk has achieved its target of having 75% of the third-party data ecosystem activate on UID2 . This means that most major third-party data providers are now using UID2.

Unilever has reported that ad impressions, including UID2, on Disney were 12X more effective in reaching their target audience than those with traditional identifiers. This is a significant value add and a compelling reason to work with The Trade Desk.

My Investment Decision

I was impressed by the quarter, as were several analysts during the call. The Trade Desk continues to outperform its industry by 4X and is on track to achieve re-accelerated revenue growth.

Someone on Twitter asked me why the stock was down 6% in the following days. While I wouldn’t describe it that way, my explanation would be the relatively high valuation. Stocks like these can be extremely volatile, but as of writing, it’s still up 48% year-to-date . As long as the company continues to deliver, I expect the stock to keep rising. Long-term.

Despite growing slower compared to all my other holdings, I have a lot of confidence in The Trade Desk. Not only am I expecting revenue growth to accelerate next year due to at least two significant tailwinds: 1. Political spending from elections and 2. accelerating CTV tailwinds , but I also believe that TTD is a rare, enduring grower for years to come.

That’s why I plan to opportunistically add to my position over time, and it might even deserve to be among the larger holdings (>10%) in my portfolio.


What they do: Provides collaboration software based on low-code and no-code building blocks
Type of revenue: Subscription-based (seats)
Cash: $935.6M
TTM revenue: $573M
Market cap: $8B vs last month’s $6.2B

That quarter was almost perfect, except for the lower-than-expected Q1 revenue. Revenue was $162.3M, which is a 49.6% increase YoY, 51% FX-adjusted, and 8.3% increase QoQ. Although I was hoping for $165M, this was a very ambitious expectation.

Q2 Guidance is $170M, which is slightly below my expected $174M. However, if we assume a typical beat, this would translate to $176.8M, a 43% YoY increase, and a 9% QoQ acceleration.

The full-year 2023 revenue guide has been raised by 2% to $706M from $693M. This was in line with my expectation of a typical FY raise in Q1.

Additionally, the full-year 2023 operating income guide has been raised to $12M from -$32M. Last quarter, I had assumed that we would see positive operating income for the full year, and now they even guided for positive operating income! Additionally, 80% of contracts are now annual, compared to 70% a year ago. This provides greater visibility and confidence in future revenue.

Cashflow & Profitability was excellent across the board:

  • Gross margin was 90.4%, a record high.

  • Operating Income was -$0.3M, which is -0.2% of revenues. This is an improvement from -$43.83M a year ago, which is a significant difference. Historically, Q1 has been the quarter with the biggest losses in previous years.

  • Net Income was $7.23M, 4.5% of revenues, up from -$43.42M a year ago.

  • Earnings per share was $0.14, up from -$0.96 a year ago.

  • Operating cash flow was $42.7M, 26.3% of revenues, up from -$12.91M a year ago.

  • Free cash flow was $38.7M, 23.8% % of revenues, up from -$16.2M a year ago. Free cash flow

Sales and marketing expenses currently account for 63.2% of revenues. Management attributes the decrease in these expenses to competitors pulling back on ad spend on platforms such as Google and Facebook.

As a result, Monday can acquire more customers for less money, as they can track the ROI for every dollar spent on sales and marketing using their “BigBrain” technology.

It is worth noting that in the first quarter of last year, S&M expenses were 100% of revenues. This was partly due to their Super Bowl ad, which cost $11M and reduced the percentage of revenues to 90%. So, we can see continued improvements on that front.

Looking at the customers, Monday added 209 net new large customers spending more than $50K+, up 75.3% YoY, 14.2% sequentially. That beat my expectations of 160 by 31%!

Last quarter I mentioned that I wanted to see the growth of that cohort stabilize in the upcoming quarters. And we got even an acceleration, which indicates further revenue acceleration in the upcoming quarters.

Even management was surprised by that strong demand:

“If you think about where we see the strength, is that the largest number of net new enterprise customers in the quarter came this quarter.”

Another highlight is that 77% of total ARR is coming from customers with more than 10 users, which is an increase from 73% a year ago. Additionally, ARR from customers spending more than $50k increased to 28% of total ARR, up from 22% a year ago. I love seeing that consistency!

Also, it’s worth noting that 59% of the Fortune 500 are already customers of monday .com, which is an increase from 52% a year ago.

Note: 70% of our customers are non-tech, and 30% are tech. The decrease in demand was mostly seen in the tech sector, which helps Monday navigate this environment compared to other businesses that have more customers from the tech sector.

Moving on to the Dollar-based Net Retention Rate (DBNRR), which decreased for all cohorts:

  • For all customers to 115% from 120%
  • For customers with more than 10 users it decreased to 125% from 130%
  • For customers spending more than $50k it decreased to 125% from 135%

However, the decrease in DBNRR was anticipated due to slower enterprise customer seat expansions amid the challenging macroeconomic environment, and this trend is expected to continue throughout FY’23.

Specifically, they expect an overall NDR of 110% for all customers and around 115% to 120% for customers with more than 10 users and customers spending more than $50k. This means we should expect a further drop of about 500 to 1000 bps per DBNRR cohort.

Note that DBNRR is a lagging metric due to its trailing four-quarter weighted average calculation, and a more recent DBNRR could already look better again.

On the positive side, the weakness in DBNRR has been offset by strong customer acquisition, as mentioned above. Monday has seen very healthy top-of-funnel activity with the expansion into CRM and other use cases, which is expected to bring some recovery on that front next year.

Also, looking at small and medium-sized businesses (SMBs), the DBNRR for that cohort was stable, given the current economy.

Moving on to products

First, the first phase of mondayDB 1.0 was launched, which upgraded the underlying infrastructure. It is currently available to 30% of accounts and will be rolled out to all customers by the end of Q2.


Second, the number of Monday Sales CRM accounts increased by an astonishing 121% QoQ, from 2,458 to 5,441. Currently, CRM is only available to a selection of our existing customer base. During the earnings call, CRM was mentioned more than ten times and is expected to be the next big revenue driver once it becomes available to all new and existing customers.

The number of Monday Sales CRM accounts increased by 121% quarter over quarter, despite only being available to a selection of Monday’s existing customer base.

Once CRM becomes available to all new and existing customers, it is expected to be another big revenue driver.

monday sales CRM

Third, on AI, several initiatives were mentioned. I found leveraging Monday’s proprietary data to be the most interesting. With access to a vast amount of data, Monday can help customers in 200 verticals set up and maintain optimal workflows and automations, while also connecting the right people to the right processes. This will improve Monday’s speed of adoption within companies and further enhance data-driven product development initiatives.

I would like to emphasize that I’m still impressed with their GTM (go-to-market) strategy.

monday continues to see very strong demand and doubled down on marketing. Comments like these sound very encouraging:

We still have been very bullish, and there’s more demand than ever before. And I think the quality of customers that are joining us right now is even higher than before.

They seem to be checking all the boxes in that challenging environment, and it’s clear that what they’re doing is working.

For those interested in their successful marketing, I wrote in detail about their GTM strategy here. Not only do almost all the metrics support their success, but also quantitative insights like G2 have included monday .com and several of our products on 18 of its 2023 Best Software Awards lists.

Overall, Monday delivered the most impressive results of all my companies this quarter. Analysts seem to agree:

“Congrats on a great quarter” “Congrats on the strong quarter” “Congrats on the strong results” “Congratulations on these fantastic results” “I’m very impressed by your billings growth”

“The strength of demand here is impressive here in the quarter and outlook despite the moderating NDR.”

“Clearly surprised us here this quarter on positive cash flow”

And one analyst wanted to understand their confidence in their FY guide. The answer:

“We continue to see stronger new customers growth , as we’ve seen, together with efficiencies , overall efficiency and cash generation , we believe this is something that provides us with some positive view on the rest of the year. So something that allows us to make this guidance."

My Investment Decision

Excellent earnings: I have already increased my allocation and plan to bring it to over 10% over time.

Key Metrics to watch are DBNRR for customers with more than 10 users, $50k customer additions, ARR% from customers spending more than $50k.


What they do: Provides a platform for managing and processing streaming data.
Type of revenue: Consumption-based
Cash: $1.85B
TTM revenue: $634M
Market cap: $9B

I started my position at CFLT on May 3rd and it has increased by over 45% since then. However, the increase hasn’t significantly impacted my portfolio due to its small size.

That’s okay, as I plan to keep it on my radar for now and increase it opportunistically.

In the upcoming weeks, I may publish a full write-up on Confluent.


My Watchlist

  • Duolingo
  • Samsara
  • MongoDB
  • Nvidia

My Previous Portfolio Reviews

And that’s a wrap.

Thank you for reading and happy investing, everyone!

@MoritzMDrews on Twitter


Thank you so much mooo (Moritz). What an extraordinary summary. You put mine to shame. Really an excellent job. I don’t necessarily agree with all your final decisions (I exited Cloudflare and Snowflake, for instance. I find repetitive reductions of guidance a real warning), but the quality of your analysis is amazing.


Excellent write up Moritz!

About Cloudflare, I also have a 17% position (up from ~15% since before ER) and have not trimmed in NET and want to add one more point that I’m monitoring:

In Nov 2022 they decided to increase prices on their pro/business plans for the first time. The key is that it does not kick in until the last 2 weeks in Q2 2023:

Any paying customers who sign up before January 15, 2023, including any currently paying customers who signed up at any point over the last 12 years, will stay at the old monthly price until May 14, 2023.

So any material impact that comes from raising prices will likely show up in Q3. Cloudflare should have a read with the 2 weeks of Q2 data - especially with churn. How does this impact their revenue and customer retention, I have no idea, but I will pay close attention on their next earnings report.